Fed ties rate hike to economic rebound

The Bloomberg Dollar Index fell to its lowest since November after minutes from the Federal Reserve policy meeting this month revealed heightened debate over the prospect of US rate increases beyond June.

For a look at the issues now facing the markets, make sure to read today's Ahead of Wall Street article.

The blue-chip Dow Jones Industrial Average and tech-heavy Nasdaq both added 0.4 per cent, rising to 21,012.42 and 6,163.02 respectively.

Global equities, meanwhile, hit record highs on Thursday and the dollar index softened.

Hang Seng Index was increased by 0.6%, the Shanghai Composite also increasing by 1.43 or 43.7971 points almost hitting the 3,107.873 mark, and the Shenzhen Composite also rising up by a total of 0.725% or 13.0341 points at 1,811.9033. A total of around 6.1 billion shares were traded on Wednesday, lower than the last 20-session average of 6.8 billion shares. The VIX "fear gauge" of expected volatility in the S&P 500 opened at 9.82, its lowest since May 10.

Advancing issues outnumbered decliners on the NYSE by 1,693 to 790. Today, the central bank's balance sheet is tallied to be around the $4.5 trillion mark.

For seven years, the Fed left its key short-term rate at a record low near zero in an effort to support the economy's recovery from the 2007-2009 recession, the worst downturn since the 1930s.

The central bank raised rates in March and December, given steady job creation and some signs of mounting price pressures - and amid the wave of optimism in the early days of Trump's term, with his promises of tax cuts and big infrastructure spending. It proposes raising the amount their limit for roll-off every 3 months.

Analysts are now pricing in the next rate hike to take place at the Fed's next meeting in June.

"My expectations are that the pace of interest rate hikes will be kept steady and stable regardless of the short-term fluctuations in the U.S. economic data", said Mark To, head of research at Hong Kong's Wing Fung Financial Group.

Market expectations for a June rate hike were 78.5 percent, according to the CME Group's FedWatch tool.

"What they have done is protect themselves by saying that if growth slows down, the rate hike is off the table", says Krishna Memani, chief investment officer at OppenheimerFunds.

The National Association of Realtors reported that existing home sales fell 2.3 per cent in April, much greater than the 1.1 per cent fall expected.

ECB President Mario Draghi acknowledged the euro zone's best economic growth run in a decade "and this will of course be fully reflected in our future decisions", while at the same time he urged caution, arguing "that economic output will not reach the currency bloc's potential before the end of next year and that wage growth is not reassuring".

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